Over the past few months various questions have been raised about body corporate insurance. In this quarterly report we will take a look at some aspects of insurance that may assist in a greater understanding of insurance in general.
Firstly, the body corporate has a legal obligation under the Unit Titles Act 2010 to insure the body corporate property (all units). This means that a unit owner does not need to obtain their own material damage policy for their unit. Generally, this also covers landlords’ fixtures and fittings, such as fixed carpet and white ware and curtains. The body corporate does not insure contents (usually classed as movable personal effects) for owners, or their tenants.
The cost of body corporate insurance can be broken up into three parts: company premium, fire service levies, and natural disaster levies. The first is what the insurance company charges to carry the property risk, and the other two are taxes imposed by the government to cover some of the costs of fire-related services and potential damage caused by natural disasters, relating to infrastructure, etc.
Fire Service Levies are a government tax, charged per unit per annum. In 2018, this fee increased from $76 to $106. The natural disaster tax (known as a EQC Levy – but covers all damage to a building from natural disasters) covers each unit to a total value of $150,000, and is charged at $300 per unit per annum. This tax increased as of July 1st, 2019 from $200, but at the same time the value per unit was also increased from $100,000. The balance of costs to fix a property from natural disaster is generally covered from the insurance held by the body corporate.
It is important when a body corporate is looking to place cover (done annually) that the policy is properly reviewed along with any policy extensions. Many insurance brokers hold specific unit title policies that they agree with insurers and can include cover for loss of rent (rented units) and alternative accommodation (owner-occupied units). The insurance will also have options for the indemnity period that is covered for this risk (this is often 24 months, but can be 36 months, and should take into account the expected time frame for the duration of any major works required due to a major disaster).
There are other aspects of insurance for unit title property that should be considered and we are always happy to speak to those owners who have questions about these types of insurance cover. Should you have questions please feel free to contact Steve Plummer of Scope Strata – 09 320 5215/027 6722777.